N.J. treasurer says state proposes $303M in cuts to deal with shortfall in current budget

Tony Kurdzuk/The Star-LedgerState Treasurer Andrew Sidamon-Eristoff (right) pauses to ask a question of Charlene Holzbaur, Director of the Office of Management and Budget, as the treasurer testifies before the Senate Budget and Appropriations Committee at the Statehouse this afternoon.

— State Treasurer Andrew Sidamon-Eristoff said today the state will make $303 million in cuts to business development, disability, education-related debt payments and other cuts here and there to to deal with what he projects to be a $325 million shortfall for the less than five weeks left in the current budget year. With income and sales taxes falling short of projections made just a few months ago, the Christie administration proposed cuts including $70 million from business development grants, $19.2 million in higher education loan payments, and $10 million from parks management.

On the other hand, there are also $70.8 million in increased costs, such as a $15 million lapse in tax settlements, and $13.6 million less in funds expected from taking school district surpluses.

Sidamon-Eristoff said it's "plausible" that the state failed to understand fully the effect of an increased New York state income tax on the amount of money New Jersey was able to collect.

The proposed fixes, some of which require legislation, include "raiding" the state disability benefit fund for $25 million.

"Are raids of these funds a good thing?" asked Sen. Paul Sarlo (D-Bergen), chairman of the Senate budget committee.

"They're a hard choice, senator," Sidamon-Eristoff said.

For the fiscal year that starts July 1, the Christie administration proposed cutting the year-end surplus down to $305 million from $501 million. The budget must be approved by the Democrat-controlled legislature and signed by the Republican governor by the end of June.

Why do New York taxes affect New Jersey budgets?

People who live in New Jersey but work in New York first pay taxes to New York.

New Jersey residents are allowed to write off at least some of the income taxes they pay on income earned in New York, such as salaries or bonuses. That reduces the amount of money they pay New Jersey - meaning less money in New Jersey tax coffers to pay for things such as property tax rebates and reduces the amount of money the state can send to school districts and municipalities.